GPG Report & Accounts 2003 - Guinness Peat Group plc

GUINNESS PEAT GROUP PLC • ANNUAL REPORT • 19assets are recovered, whether through depreciation or sale.Negative goodwill is matched with the acquired company’stangible fixed assets, and any excess is then attributed to thecompany’s other non-monetary assets.Prior to 1998, negative goodwill was written off directly toreserves. Any such goodwill has not been reinstated. This willbe released through the profit and loss account on disposalof the business, or underlying asset, to which it relates.i) TURNOVERTurnover, which excludes VAT and other sales taxes, consistsof amounts receivable in respect of goods supplied andservices rendered to third parties and the proceeds from thedisposal of current asset investments.Sales of goods are recognised in revenue when controlpasses to the customer, except that sales of aluminiumproducts are recorded when goods have been despatchedand the associated risks and rewards have been transferred.Income from sales of property is recognised on a percentageof completion basis.Whilst this is a change of accountingpolicy from the prior year, the effect is immaterial to thecurrent or prior year results.The previous policy was torecognise such income only when unconditional contractshad been exchanged and 10% of the contract price received.Contracting turnover comprises the value of work executedduring the year, including the settlement of monetary claimsarising from previous years.j) STOCKS, WORK IN PROGRESS AND LONG TERMCONTRACTSStocks and work in progress are stated at the lower of costand net realisable value. In general, cost is determined on afirst in first out basis and includes transport and handlingcosts. In the case of manufactured products, cost includes alldirect expenditure and production overheads based on thenormal level of activity. Net realisable value is the price atwhich stocks can be realised in the normal course ofbusiness after allowing for the costs of realisation and, whereappropriate, the cost of conversion from their existing stateto a finished condition. Provision is made for obsolete, slowmoving and defective stocks.Raw materials and consumable stores are valued at actual orweighted average cost as appropriate.Long term contracts are generally those exceeding a year induration and are valued at cost,comprising direct expenditureand the relevant production overheads,plus the profitattributable to the work performed to date.The amountsrecoverable from such contracts,being the excess of theirvaluation over payments received and receivable,are includedin debtors.Provision is made for all losses expected to arise oncompletion of the contracts entered into at the balance sheetdate,whether or not work on these has commenced.Land for resale, which is included within work in progress, isvalued at the lower of cost and net realisable value. Costincludes capitalised interest and those costs necessary toprepare the land for sale.k) PENSIONS AND OTHER POST RETIREMENT BENEFITSPension costs in respect of defined contribution schemes arecharged to the profit and loss account in the year to which theyrelate.Costs in respect of defined benefit pension schemes andother post retirement benefits are spread over the employees’service lives,in accordance with actuarial advice in such a waythat the pension cost is a substantially level percentage ofcurrent and expected future pensionable payroll.l) TAXATIONProvision is made for domestic and foreign taxation assessableon the profit for the year as adjusted for disallowable and nontaxableitems.Deferred taxation is provided in full in respect oftiming differences which have arisen but not reversed at thebalance sheet date,except that deferred tax assets (includingthose attributable to tax losses carried forward) are onlyrecognised if it is considered more likely than not that they willbe recovered.Deferred taxation is not provided in respect ofthe accumulated reserves of overseas subsidiaries,associatesand joint ventures unless a dividend has been declared orthere is a binding obligation to distribute those reserves.Deferred taxation is measured on a non-discounted basis.m) INVESTMENT INCOMEIncome from equity investments is recognised when thelegal entitlement vests. This represents a change from theprevious accounting policy of recognising such incomewhen declared, but the change has no material impact onthe current or prior year results.Dividends from UK companies are presented net of theattributable tax credit. Dividends received from overseascompanies include any withholding taxes, but exclude anyunderlying tax paid by the investee company on its ownprofit. Special dividends arising from the Group’s investmentsare included as income in the profit and loss account and,where appropriate, an impairment provision is recognisedagainst the investment.